The expansion of the coronavirus through northern Italy, where seven dead have already been claimed, has caused a deep depression in European stock markets. All the stock exchanges registered serious falls, from 5.4% of that of Milan to 4% of those of Frankfurt, Paris or the Spanish Ibex 35. The markets react with distrust to the evident difficulties to stop and confine the propagation of the disease, and manifest the dire immediate expectations in the world tourism market, transport, airlines and consumption. The stock market crash is the most serious since the one raised by Brexit, which gives a precise idea of the restlessness that has taken hold of investors. Suddenly, the spread of Covid-19 constitutes a dangerous economic threat such as trade war, Brexit or the slowdown, although it will probably be less persistent.
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The Minister of Economy, Nadia Calviño, has asked investors for serenity and peace of mind for the markets; ensures that the economic impact of the virus will be limited if the disease can be controlled during the first trimester. The appeal to calm is timely because the entry of the Wuhan virus in Italy invites to make stunned decisions, guided by panic. The most disastrous would be the unilateral closing of borders; Such a decision would juggle tourist flows and delve a little deeper into the European economic slowdown.
As in all episodes of crisis, the European response has to be coordinated from the European institutions. It would not hurt the European organizations, the Parliament or the Commission, to establish a common protocol to curb health risks as much as possible without resorting to the disorderly closure of borders in the first instance. It is true that the potential pandemic (as defined by the World Health Organization yesterday) encounters obvious health concerns, but at this time closing the borders may report few health benefits and, on the contrary, would cause considerable damage to the European economy . In any case, decisions should not be unilateral.
The health crisis in northern Italy suggests, in any case, that the economic impact of Covid-19 has to return to the calculation table. The International Monetary Fund recently estimated its cost at 0.2% of global GDP; It will probably be superior, it will depend on its duration and the capacity of international health institutions to stop the spread of the virus. At the moment, the irruption in Europe seems to indicate confusion and contributes to support the perception that the risk of propagation is not controlled; It is urgent that the European and Italian authorities explain to public opinion what the plan is to cancel that risk.
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